Concrete AnalysisLondon remains safe haven for Chinese property investors
While entry costs have risen due to China's depreciating yuan, London property offers something for every investor's strategy and risk appetite
The low liquidity of property as an asset class has always attracted investors looking to avoid instability. As global markets brace for the impact of China's devalued currency and decelerating economy, I, like most commentators, are hesitant to try to predict what will happen next.
Will so called safe-haven markets, such as London, continue to hold their allure for Chinese investors seeking shelter from the stock market storm?
In a word - yes. While entry costs have risen due to China's plunging yuan, London's property market continues to offer something for every investor's strategy and risk appetite. In fact, in the early days of the global financial crisis, London property saw significantly shallower dips and a much faster recovery than other more liquid investment assets and has continued to rise in value at a historic pace.
To explain investors' preoccupation with London property, let us start with the bigger picture. A robust economy, strong sovereign currency, transparency and booming population are all driving up demand for housing. Balance this against the city's endemic shortfall of new homes and prices are continuing to track steadily upwards at a sustainable rate - perfect conditions for the longer-term five to 10-year investment play most investors would be wise to take.
For buy-to-let investors, London's rental market is delivering yields of up to 6 per cent in Outer London. This trend is often described as the ripple effect, and drives capital growth patterns as well. With prime central property appreciating an average of only 2 per cent over the last 12 months, buyers are starting to seek out new pockets of value in Outer London, where gains of over 25 per cent are forecast in the next three years.
For many investors, especially those not familiar with London, predicting exactly where these pockets of value are going to be created is the tricky part. A glance at the city's future commuter-train map - which is due to be transformed come 2018 when Crossrail welcomes its first passengers - is a useful first step.